Compliance June 1, 2023

Senate HELP Committee Asks DOL to Focus on 6 SECURE 2.0 Provisions

Areas including emergency savings and employee ownership were identified as 2024 brings more SECURE 2.0 regulatory deadlines.

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The leaders of the Senate Committee on Health, Education, Labor and Pensions issued a letter this week urging the Department of Labor to prioritize implementation of certain provisions in the SECURE 2.0 Act of 2022, including those regarding employer ownership, defined benefit annual funding notices and emergency savings.

“We hope DOL will effectively and expeditiously implement the SECURE 2.0 Act—just as DOL has done and continues to do with a slew of bipartisan retirement reforms passed in 2019,” the committee wrote in the letter. “While full implementation of the SECURE 2.0 Act is the ultimate goal, we urge DOL to prioritize administration of the following provisions.”

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The HELP committee, led by Senator Bernie Sanders, I-Vermont, as chair, and Senator Bill Cassidy, R-Louisiana, as the ranking member, went on to urge the DOL, currently run by Acting Secretary Julie Su, to prioritize six provisions. Su told the committee in April that the DOL would provide additional guidance on SECURE 2.0 in a “timely manner.”

The committee’s focus areas included Section 346, which establishes an Employee Ownership Initiative within the DOL, authorizing a $50 million grant program to promote employee ownership of businesses. The DOL would also need to issue formal guidance on employee stock ownership plan valuation standards, according to SECURE 2.0. The next area of focus was Section 343, which requires administrators of all defined benefit plans that are subject to ERISA to provide an annual funding notice to the Pension Benefit Guaranty Corporation. The notice must also alert participants in single-employer plans that if plan assets are sufficient to pay vested benefits not guaranteed by the Pension Benefit Guaranty Corporation, participants and beneficiaries may receive benefits in excess of the guaranteed amount, which generally uses assumptions that result in a plan having a lower funded status compared to the disclosed funded status.

The third area on which the letter focused was Section 127, which allows employers to offer pension-linked emergency savings accounts to their non-highly-compensated employees. Employers can automatically opt employees into these accounts at no more than three percent of their salary, and the portion of an account attributable to the employee’s contribution is capped at $2,500, or lower as set by the employer.

Additional areas of attention included Section 347, which directs the DOL to study the impact of inflation on retirement savings and submit a report to Congress on the findings of the study. Section 321 requires the DOL to review the current interpretive bulletin governing pension risk transfers, then determine whether amendments are warranted. Finally, Section 341 directs the Department of the Treasury and the DOL to consolidate defined contribution plan notices into a single notice.

“Many of these provisions also require the Department of Labor  to engage in rulemaking and issue further guidance and reports under prescribed deadlines,” the letter stated.

The Insured Retirement Institute, an industry association in support of SECURE 2.0 legislation, wrote in support of the HELP committee’s letter.

“Implementing required regulations is essential to deliver the substantial benefits the Secure 2.0 Act provides,” Paul Richman, the chief government and political affairs officer of the Insured Retirement Institute, said in a statement. “The emergency savings rule was an IRI-advocated provision that can aid under-saved workers and retirees. … We also believe a study on the effects of inflation on retirement savings will yield important insights to help craft additional bipartisan public policy solutions to help ensure retirees do not outlive their retirement savings.”

The HELP committee has advanced Su’s nomination as Secretary of Labor, but a Senate vote to confirm her is still pending passage amid Republican opposition.

The HELP committee push comes after a May 24 open letter from congressional leaders to Secretary of the Treasury Janet Yellen and IRS Commissioner Daniel Werfel clarifying what Congress intended with certain provisions of the SECURE 2.0 Act of 2022. In the letter, a bipartisan group of Senate and House members said they intend to correct some technical errors but did not spell out a timetable.

Benefits June 1, 2023

PPG Agrees to $309M Pension Risk Transfer Deal

The transaction with Legal & General and RGA is intended to secure the retirement benefits of more than 4,000 PPG retirees.

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PPG Industries Inc. entered into a $309 million pension risk transfer transaction with Legal & General Retirement America and Reinsurance Group of America Inc., the insurers announced Wednesday 

The lift-out covers more than 4,000 retirees from the Pittsburgh-based Fortune 500 company and beneficiaries with benefits under a defined benefit pension plan sponsored by PPG, a global leader in manufacturing paints, coatings and specialty materials.  

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A lift-out is a PRT transaction in which plan sponsors work with pension consultants or other experts to identify a subset of their plan population whose provided benefits—and the financial liability attributable to those benefits—are transferred to a private insurer, according to Nationwide Financial.  

LGRA is the lead administrator and will be fully responsible for the service and administration of all participants transferred as part of the lift-out. A PPG spokesperson said in an emailed statement that the company settled the transaction in March for certain retirees and their beneficiaries who began receiving their qualified pension benefit prior to or around January 1, 2023. 

PRT sales broke records once again in the first quarter of 2023, when U.S. single premium pension risk transfer sales reached $6.3 billion, a rise of 19% from Q1 2022 and the highest Q1 total recorded, according to data from LIMRA.  

LGRA, in its Pension Risk Transfer Monitor, predicted about $23 billion in PRT deals will close in the first half of this year, compared to $17.6 billion in H1 2022 and $8.8 billion in H1 2021.  

“We’re seeing continued positive secular trends for growth,” George Palms, president of LGRA, says. “It’s always hard to predict where the market is going to land because the multi-billion-dollar, jumbo transactions are the ones that drive the growth, ultimately, in the market. But certainly, if you look at the numbers, … the signs point toward it being a very strong, if not record, year.” 

Palms adds that the recent volatility in the stock market is positive in terms of plan sponsor demand for PRT transactions because it “demonstrates the value of having somebody else responsible for those liabilities and taking them over.” 

“I think if you get to the point of something more catastrophic, like in the event that the U.S. were not to raise the debt ceiling, then all bets would be off and CFOs would be focusing on how they can get enough liquidity to get through the ensuing financial crisis that had been created,” Palms says.  

This year’s second quarter already got a significant boost from an $8.05 billion transfer on May 3 by AT&T to insurer Athene Holding Ltd., owned by Apollo Global Management. The insurer will start making payments to approximately 96,000 AT&T beneficiaries in August, according to securities filings.  

That annuity purchase was funded “directly by assets of the plan via the pension trust underlying the Plan and required no cash or asset contributions by AT&T,” the filing stated.  

In split transactions like the PPG deal, Palms explains that the broker split the deal into two segments: one for which LGRA is responsible, and one for which RGA is responsible. A participant of the pension plan would receive a certificate from both LGRA and RGA, as they both share a portion of the liability. 

“RGA has a 50-year history in the U.S. reinsurance industry and has supported PRT transactions globally for more than 15 years,” said David Lipovics, vice president of U.S. pension risk solutions at RGA, in a press release. “We are delighted to be bringing our exceptional financial strength and global expertise directly to U.S. pension plans.” 

RGA has been a long-term reinsurance partner of LGRA, and the companies are expanding their decades-long partnership to support the U.S. PRT market with “strategic solutions for plan sponsors seeking to de-risk their pension plans,” according to a press release. 

“We are proud to work together with RGA to protect the retirement income of over 4,000 of PPG’s retirees and beneficiaries,” said Palms in a press release. “LGRA is committed to providing exceptional customer service and ensuring a smooth transition for both PPG and the participants. This transaction comes at the close of another historic quarter in the PRT market, highlighting the growing role PRT is playing in the U.S. market.”  

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